Woodside (WPL) Strategic Valuation, page-12

Let me give my thoughts on a few things:

1. Woodside and Hydrogen
The capital towards these projects are relatively small and phased to match the market growth. ie. if the market does not grow then the investments will not be made by Woodside. Some small investments into these areas will be beneficial if the returns are there and if it builds a future customer base. I strongly believe that Meg coming from Exxon, is not one to squander capital to please the ESG crowd and is doing the hydrogen investments strategically at pace.

2. Wall of cash
The BHPP merger will result in an enormous wall of cash over the next 3-5 years. The question is what do you do with this cash. The options are
1. Dividends
2. Share buy backs
3. Capital investment into Oil & Gas
4. Capital investment into New Energy (Hydrogen, CCUS)
5. Pay down debt (~US 8 billion? total)

I believe they will be able to do all 5 items above given the cash that the business will be generating. Cash Flow From Operations (CFFO) will be >14 billion USD annually over the coming 4 years imho. This allows annually:

1. 4 billion dividend (US2.1 per share)
2. 1 billion share buy back (on market on to keep a $35+ floor on the SP)
3. 6 billion O&G capex ($24 billion total, $8.5B Scarborough/PT2, $2.5B Sangomar, $5B Deepwater GOM capex, $8B sustaining capex)
4. 1 billion hydrogen capex
5. 2 billion debt pay-down

By 2026 when Scarborough/PT2 is finished the business will have zero debt with $4 billion invested into 2-3 hydrogen plants. Again, if the economics don't stack up then I don't think they will invest in hydrogen. But that said if the policy support isn't there to make hydrogen economic then the oil and gas assets will be worth a lot more as the world would be struggling to decarbonise and move to alternatives so the H2 investments are a good hedge.